Not Indiana

As we have explored previously (see my Dome article), Indiana is the Great Lakes state that is most often held out as the model for Michigan to emulate if it wants to grow its economy. Out going Indiana Governor Mitch Daniels has been sited here as one the best.

Indiana might be a model low tax/small government state and Governor Daniels may have been a good governor in managing the states finances and enacting a conservative agenda. That is why the state and the Governor are sited by the political right and the business community as models. The only problem is that Indiana has a lousy economy. On almost all metrics worse than Michigan even after our terrible last decade.

In a terrific blog Richard Longworth, Senior Fellow at The Chicago Council on Global Affairs, provides the details on just how bad Indiana has fared during the Daniels administration. He writes:

Mitch Daniels will soon be leaving the Indiana governor’s office to become president of Purdue University. He’ll leave Indianapolis with praise from budget-balancers in other states, the admiration of pundits and a wistful regard from the Republican Party, which hoped that he could have been their presidential nominee this year. … It’s an odd chorus of huzzahs for a governor who, if he hasn’t impoverished his state, has helped impoverish its residents. All statistics, including those from Daniels’ own government, show that per capita income in Indiana has steadily declined during his eight years as governor. When he took over, Indiana ranked 33rd among the 50 states in per capita income: the latest figures, from 2010, rank it 42nd, with no reason to think things have improved since then. If Indiana is becoming the Mississippi of the Midwest, the Daniels years helped make this happen

Indiana is the model Great Lakes state in terms of low taxes,small government and now right to work. It has put in place the policies that Lansing policy makers have made their agenda to spur the Michigan economy. But they have not led Indiana to economic success, but rather very low per capita income and private sector employment earnings per capita (see our latest progress report), high unemployment and low education attainment. Why would we want that for Michigan?

As Longworth writes: … what we can say for sure is that Indiana has tried the other approach — reduced government spending, lower taxes, fiscal restraint, cuts in education, repressed wages — and the result is a steadily declining standard of living for most Hoosiers. At first, this doesn’t make sense. Businesses, we are told, want low taxes, low costs, fewer regulations, less social responsibility. A state offering these pluses is bound to attract businesses, right? Right — but the wrong businesses. As Renn points out eloquently, the businesses who are most concerned about saving money on taxes and wages are low-cost, low-wage businesses that care only about costs, not quality. High-value businesses care about costs, too, of course, he says, but they also want and need “a highly-educated work force, global connectivity, an entrepreneurial mindset and ecosystem……It’s hard to grow your life sciences industry without getting more life scientists.” Businesses looking for nothing except low costs have already found them — in Mississippi, Mexico or China. Businesses worth having are willing to pay for smart workers, healthy cities, a good environment. These are the businesses that Indiana, which its budget-balancing fervor, have deliberately shunned. As those income figures shows, its people have paid the price. As Mitch Daniels leaves office, his legacy is a lesson to the states next door.

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.